SINGAPORE, 28th June, 2024 (WAM) -- Asian stocks were on track for a fifth straight month of gains on Friday, bolstered by a growing view that cooling U.S. inflation could prompt the Federal Reserve to ease rates this year, while the yen tumbled to a 38-year low against the dollar.
Friday is packed with risk events for markets after a relatively subdued week, with figures for May's U.S. core personal consumption expenditures (PCE) price index – the Fed's preferred measure of inflation – taking centre stage later in the day, Reuters reported.
Asian markets were little fazed by the first U.S. presidential debate between Democratic President Joe Biden and his Republican rival Donald Trump ahead of the November election, though U.S. stock futures and the dollar rose as investors narrowed the odds on a Trump win.
Wall Street's record high lifts Asian stocks
S&P 500 futures and Nasdaq futures both ticked higher, rising 0.23 percent and 0.38 percent, respectively.
EUROSTOXX 50 futures gained 0.32 percent, while FTSE futures advanced 0.27 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent and was on track to gain more than 3 percent for the month, its best performance since February.
Growing expectations of imminent Fed easing and momentum from the artificial intelligence boom have sparked a risk rally across stock markets and catapulted Wall Street to record highs, in turn lifting Asian shares.
U.S. PCE figures
Traders are now pricing in a 64 percent chance of a first Fed cut in September, up from 50 percent a month ago, according to the CME FedWatch tool, though analysts said those expectations could be derailed if Friday's core PCE figures surprise to the upside.
"If tonight's core PCE inflation were to come in much hotter than the 2.6 percent expected and after upside surprises to Canadian and Australian inflation data this week, it would inflame concerns that the decline in global inflation has bottomed out and may have reaccelerated in some countries," said Tony Sycamore, a market analyst at IG.
Chinese markets, meanwhile, reversed early losses to trade higher, with China's benchmark CSI300 last up 0.64 percent. Hong Kong's Hang Seng Index gained 0.56 percent.
Forex
In currency markets, the dollar was on the front foot and was eyeing a monthly gain of nearly 1.4 percent against a basket of currencies.
The Aussie fell 0.38 percent to US$0.6623, while the euro dipped 0.16 percent to US$1.0686 and was headed for a monthly decline of roughly 1.5 percent.
The common currency continues to be weighed by political turmoil in the bloc, with France's snap election due to kick off this weekend.
Fragile yen
The yen tumbled to a trough of 161.27 per dollar, its weakest since 1986.
The Japanese currency has fallen some 2.3 percent this month and more than 12 percent for the year against a resilient dollar, as it continues to be hammered by stark interest rate differentials between the U.S. and Japan, which has maintained the appeal of using the yen as a funding currency for carry trades.
In a carry trade, an investor borrows in a currency with low interest rates and invests the proceeds in higher-yielding assets.
The latest decline in the Japanese currency has kept investors on edge, watching for possible intervention from Tokyo. Japanese authorities spent 9.79 trillion yen (US$60.94 billion) at the end of April and in early May to push the yen up 5 percent from its 34-year low of 160.245 then.
Weak yen uplifts stocks
The yen's weakness has, meanwhile, been a boon for the Nikkei, which last rose 0.8 percent. It was eyeing a monthly gain of about 3 percent.
Data on Friday showed core consumer prices in Japan's capital rose 2.1 percent in June from a year earlier, highlighting the challenge the Bank of Japan faces in timing its next interest rate hike, as cost pressures from the weak yen keep inflation above its 2 percent target but also hurt consumption.
Also on Friday, Japan's government appointed financial regulation expert Atsushi Mimura as its top currency diplomat, replacing Masato Kanda who battled sharp yen declines this year with the biggest currency intervention on record.
Commodities
In commodity markets, gold struggled under the pressure of a firm dollar and fell 0.3 percent to US$2,320.40 an ounce.
Brent crude oil futures rose 0.47 percent to US$86.80 a barrel, while U.S. West Texas Intermediate crude futures gained 0.57 percent to US$82.21 per barrel.